Tepid U.S. Consumer Spending Keeps Economic Rebound On TrackBy
The tepid pace of U.S. consumer spending in May is nevertheless enough to keep the economy on track for a rebound in the second quarter, helped by income gains, Commerce Department figures showed Friday.
Highlights of Personal Income and Spending (May)
Americans may be reluctant to ramp up spending until they see a faster pickup in wages, even as steady hiring, healthier balance sheets and low borrowing costs are helping to support their purchases. Since household spending accounts for about 70 percent of the economy, any persistent weakness would damp the outlook for a stronger rebound in economic growth after the lackluster pace of early 2017.
An outsized 4.8 percent jump in dividends powered May’s gain in inflation-adjusted disposable income, which matched the biggest since December 2012. Wages and salaries, meanwhile, cooled to a 0.1 percent increase following a 0.5 percent gain in April.
The data on prices showed a further slowdown in May. If they fail to pick up the pace in coming months, Federal Reserve policy makers could reconsider plans to raise interest rates later this year while they’re waiting for inflation to reach their 2 percent goal. At the same time, weak price pressures may help boost consumer purchases.
- Adjusted for inflation, purchases increased 0.1 percent after a 0.2 percent gain
- Disposable income rose 0.6 percent after adjusting for inflation
- Saving rate rose to 5.5 percent, highest since September, from 5.1 percent in April
- Household outlays on services rose 0.1 from previous month after adjusting for inflation; unchanged in April
- Spending on goods rose 0.1 percent after adjusting for inflation, following 0.7 percent gain
— With assistance by Jordan Yadoo